Foreclosure filings rise sharply

Many still can’t make payments with modified loans, UCLA professor says.

April 24, 2010|By Zain Shauk

Homeowners throughout the region continued to struggle with mortgage payments during the first quarter of 2010, during which the number of foreclosure filings jumped 11%, according to a report from real estate tracking firm RealtyTrac.

Borrowers who owe far more than their homes are worth are finding it difficult to modify those loans, real estate agents and experts said, which partially explains the increase from the previous quarter.

The figures included homes in Glendale, Burbank, La Crescenta and La Cañada Flintridge.

“In many cases no matter what you do to modify the terms of the loan, you still can’t get the borrower to the point where they could make their payments,” said Paul Habibi, a professor of real estate finance at the UCLA Anderson School of Management.

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Considered separately from loan defaults and foreclosures, the number of bank repossessions also surged throughout the region, growing 19%, according to RealtyTrac.

Banks had been wary of repossessing homes, but have started to take action as efforts to restructure loans have largely failed to keep borrowers on top of their payments, experts and agents said.

Although recent trends show that repossessions have increased, lenders have refrained from quickly retaking homes and putting them up for sale, keeping the supply of homes on the market low, Habibi said.

“To some extent, that is constraining supply of distressed real estate, and it’s actually having some positive effect on the price market,” he said.

One in every 110 borrowers in the region received foreclosure-related filings in the first quarter, including notices of default, auction, trustee sale, foreclosure or bank repossessions, according to RealtyTrac.

That overall rate was better than the statewide figure of one in every 62 homes that received notices, but was worse than the national average of one in every 138 homes, according to the firm.

The largest local increase in filings came in Glendale, where 15% more homes received notices, according to RealtyTrac.

In La Crescenta, which continues to lead the region with its rate of one in every 74 homes, the amount of foreclosure-related filings jumped 12%, according to the report.

One in every 155 Burbank homes received a similar filing; in La Cañada Flintridge, one in every 148 homes got notices, according to the report.

While some borrowers have defaulted on their loans because they can’t afford them, others have decided to strategically stop making mortgage payments that they feel are unreasonably high, said Marcella Theisman, an agent for Sundance Realty in La Crescenta.

“They don’t want to make the payment,” she said. “It’s like, ‘Why do I want to be the fool that pays an $820,000 mortgage when this house next to me sells for $600,000?’”